Featured Municipal Bond Issue in the Market, Week of 07/24/2017: Port of Seattle Revenue Bonds (Intermediate Lien) – $705 Million



This week’s featured bond comes from the State of Washington. The Port of Seattle is issuing intermediate lien revenue and revenue refunding bonds in the amount of $705 million the week of July 24, 2017. These Port of Seattle revenue bonds consist of four separate series.

Series 2017A consists of $17 million in revenue refunding bonds, and interest on the bonds is considered excludable from gross income for federal income tax purposes. Interest on bonds in Series 2017A is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Series 2017B consists of $266 million in revenue refunding bonds, and interest derived from this series is subject to federal income taxation.

Series 2017C consists of $325 million in revenue bonds, and Series 2017D consists of $97 million in revenue bonds. Interest on the bonds is considered excludable from gross income for federal income tax purposes, with the exception of bonds held by ‘substantial users’ of facilities financed by the bonds, or by ‘related persons’ to the users. Interest on Series 2017C and Series 2017D is considered an item of tax preference for purposes of federal alternative minimum tax imposed on individuals and corporations.

The purposes of Series 2017A and Series 2017B are to refund all or a portion of previously issued bonds, issued in 2009. Series 2017C and Series 2017D are being issued by the Port to finance capital improvements of aviation facilities.

Security for the bonds consist of a pledge of available revenues, but careful attention should be paid to the details of available revenues, and the prominence of the lien of these bonds in relation to other obligations of the Port. Available revenues consist of gross revenues of the port, excluding released revenues, if any, after payment of all operating expenses not paid by other revenues, all payments required to be made on first lien bonds, any payments that may be created in the future to make payments, if any, on any revenue bonds or other obligations of the ports having liens on net revenues.

Further details on the purposes, tax status, and security, including a detailed list of exclusions of revenues considered available as ‘gross revenues’ for the purposes of these bonds, as well as other matters pertaining to these Port of Seattle revenue bonds can be found in the preliminary official statement, provided by MuniOS.

The Port of Seattle primarily serves the Seattle-Tacoma-Bellevue WA Metropolitan Statistical Area. As of May 2017, the Seattle metro area has an unemployment rate of 3.6%, which is 0.8% lower than the national rate for May, and 1.0% lower than at the same time in 2016. The chart below shows the changes in the Seattle MSA, State of Washington, and U.S. unemployment rates for the past ten years. MuniNet provides this data and more, easily accessible, for all 50 states and each Metropolitan Statistical Area in the country, in our Employment Database.

seattle revenue bonds

Provided at left is a quick snapshot of financial characteristics of the Port of Seattle, compared with the median for large airport systems, as of 12/31/2016, courtesy of Merritt Research Services, LLC. It should be note that, while the numbers for the Port of Seattle specifically are pertinent, the sector medians have a limit to their relevancy, because 22% of the Port’s gross revenues are non-aviation driven, mostly from the seaport. Merritt has many of the sector medians publicly available and regularly updated on their Benchmark Central page. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness)In addition to the Merritt information related to the featured bond, more information can be found on our municipal bond calendar, city, state, and county pages, and our employment database.

These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.